MILAN (Reuters) - French media group Vivendi could avoid having to sell a 20 percent stake in Mediaset by placing it into a blind trust, a source at Italy's communications watchdog AGCOM said on Wednesday.

AGCOM said in April that Vivendi's stake-building at both broadcaster Mediaset and phone group Telecom Italia was in breach of rules designed to prevent a concentration of power in the country's telecoms and media sector. It told the French group to reduce its stake in one of the two companies to below 10 percent.

Vivendi is the biggest single shareholder in Telecom Italia, with 24 percent, and also holds a 29.9 percent voting stake in Mediaset, making it the second-largest investor in Italy's biggest private broadcaster behind the family of former Prime Minister Silvio Berlusconi.

"AGCOM would rather see Vivendi sell the stake above the 10 percent threshold. But if they transfer it to a blind trust which is set up properly, but really properly, it could be okay", the source, who has direct knowledge of the matter, told Reuters.

One condition for the blind trust to be considered effective would be that the transferred shares can never be used by the French group to vote at Mediaset shareholder meetings, the source said.

Vivendi, led by billionaire Vincent Bollore, has one year to comply with the AGCOM ruling and avert a fine of up to 5 percent of its revenues - or 540 million euros. It has lodged an appeal against the decision with an Italian administrative court and the first hearing has been set for February 2018.

In the meantime, the French group must tell AGCOM how it intends to comply with the divestment order. On Tuesday, AGCOM said Vivendi had submitted an amended proposal to reduce its position of influence at Mediaset, adding that further talks were necessary to make sure a "structural" solution was found.